8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004

 
 

FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934  
 

Date of Report (date of earliest event reported): November 5, 2002  
 

BROCADE COMMUNICATIONS SYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

 
 

Delaware	000-25601	77-0409517
(State or other jurisdiction of incorporation or organization)	Commission File No.	(I.R.S. Employer Identification Number)

 
 

1745 Technology Drive
San Jose, California 95110

(Address of principal executive offices)

 
 

(408) 487-8000

(Registrant’s telephone number, including area code)

ITEM 5.    OTHER EVENTS

On November 5, 2002, Brocade Communications Systems, Inc. issued a press release announcing that it had agreed to acquire Rhapsody Networks, Inc. The press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

ITEM 7.    FINANCIAL STATEMENTS AND EXHIBITS

(c)	Exhibits.
	Exhibit 99.1    Brocade Communications Systems, Inc. Press Release issued November 5, 2002.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act or 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Brocade Communications Systems, Inc. (Registrant)
Date:  November 7, 2002	By:	/s/ Antonio Canova Antonio Canova Vice President, Finance and Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number
99.1	Brocade Communications Systems, Inc. Press Release issued November 5, 2002.

EX-99.1 3 f85693exv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 BROCADE TO ACQUIRE RHAPSODY NETWORKS Storage Networking Leader to Deliver Industry's First Open, Intelligent Platform for Fabric Applications SAN JOSE, Calif., November 5, 2002 -- Brocade Communications Systems, Inc. (Brocade(R)) (Nasdaq: BRCD), the world's leading provider of infrastructure solutions for Storage Area Networks (SANs), announced today an agreement to acquire Rhapsody Networks, a privately-held provider of next-generation intelligent switching platforms. Through the acquisition, Brocade will extend its leadership position in the storage networking market to deliver the industry's first open, intelligent platform for fabric applications. By extending its intelligent platform, Brocade will help OEMs, application partners, and SAN customers unlock the next level of intelligence in the SAN fabric and further simplify the management of heterogeneous storage environments. "We are pleased to announce the acquisition of Rhapsody Networks. The powerful combination of Rhapsody's advanced technology and talented engineering team, coupled with Brocade's market leadership, installed base, experience, and partner ecosystem will further solidify Brocade's position as the reference platform of choice and accelerate the next phase of the SAN market's evolution," said Greg Reyes, Brocade Chairman and CEO. As the result of this acquisition, Brocade expects to deliver to market a new class of intelligent fabric application switches, which will be fully interoperable with the Brocade SilkWorm(R) family of Fibre Channel fabric switches. Brocade will work with leading OEM and application partners to enable next-generation fabric applications, including fabric-based volume management, fabric-based data replication, and fabric-based data management. These new fabric applications will significantly extend the functionality, simplify management, and reduce the operational cost and complexity of managing and administering existing storage environments. By simply adding a new fabric application switch to an existing Brocade fabric, SAN customers will multiply the benefit of their investment in Brocade infrastructure. The Rhapsody intelligent fabric application development platform is available today to OEM partners. Brocade estimates that the first fabric applications based on these platfoms will be available from specific OEM partners by the end of calendar year 2003. The Rhapsody architecture is highly complementary to Brocade fabric switches. In addition to hosting fabric applications directly, it supports multiple protocols -- including Fibre Channel and IP -- and is accessed through an open API. The API will be integrated with the Brocade Fabric Access API to deliver a complete solution for the development of storage and data management applications. Continued Reyes, "Through this open, intelligent platform for fabric applications, SAN customers will be able to centralize data management by integrating fabric applications into their existing environments, while protecting their investment in Brocade SAN infrastructure. The intelligent platform will provide our OEM and application partners with an increased market opportunity for new revenue from innovative fabric-based applications." Conference Call Information Brocade will host a conference call today, Tuesday, November 5 at 2:30 p.m. Pacific Time to discuss the acquisition. To participate in this conference call, please call 877-407-2753 or 706-634-7602, passcode "Brocade." A simultaneous webcast of the conference call will be available at http://www.brocade.com/investors. An archive of the conference call will be available through November 12 at 800-642-1687 or 706-645-9291, passcode 6503726. Brocade will report final financial results for its fourth quarter and fiscal year 2002 on Thursday, November 21, 2002 after the close of market. Acquisition Details Under the terms of the acquisition agreement, Brocade will acquire all outstanding shares of Rhapsody in exchange for 23.4 million shares of Brocade common stock. This represents approximately 10 percent of outstanding common stock as of November 5, 2002. Final purchase price will not be determined until the closing date-which we expect to be in January 2003. Based on the closing price of Brocade stock as of November 4, 2002, the deal will be valued at approximately $175 million. Development platforms from Rhapsody are shipping today to OEM partners. Brocade estimates availability of fabric applications based on these platforms by second half of fiscal 2003 from specific OEM partners. Based on this timing, we would expect revenue associated with the Rhapsody transaction to begin in late fiscal 2003, with anticipated acceleration of revenues in fiscal 2004. Assuming that this transaction is completed by January of 2003, Brocade expects the transaction to be dilutive to fiscal 2003 earnings per share by $0.09; or $0.03 per quarter. This excludes one-time charges associated with the acquisition and the amortization of intangibles and deferred stock compensation costs. We expect the increase in ongoing operating expenses resulting from this transaction to be approximately $6 to $7 million per quarter. We estimate that the transaction will become accretive, on a pro forma basis, in the third or fourth quarter of fiscal 2004. The Boards of Directors of Brocade and Rhapsody have unanimously approved the transaction. Subject to regulatory approvals and customary closing conditions, Brocade expects the transaction to close in January 2003. About Brocade Communications Systems, Inc. Brocade offers the industry's leading intelligent platform for networking storage. The world's leading systems, applications, and storage vendors have selected Brocade to provide a networking foundation for their SAN solutions. The Brocade SilkWorm(R) family of fabric switches and software is designed to optimize data availability and storage and server resources in the enterprise. Using Brocade solutions, companies can simplify the implementation of storage area networks, reduce the total cost of ownership of data storage environments, and improve network and -2- application efficiency. For more information, visit the Brocade website at http://www.brocade.com or contact the company at info@brocade.com. Forward-Looking Safe Harbor Statement This news release contains forward-looking statements that involve risks, uncertainties and assumptions. You can identify these and other forward-looking statements by the use of words such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intend," "potential," "continue," or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. For example, statements of expected synergies, product introductions and features, dilution or accretion, amount and timing of future revenues and expenses, timing of closing, industry and market ranking, execution of integration plans and management and organizational structure are all forward-looking statements. Risks, uncertainties and assumptions include the possibility that the market for the sale of certain products may not develop as expected; that development of these products may not proceed as planned; that the transaction does not close; or that prior to the closing of the proposed merger, the businesses of the companies suffer due to uncertainty; that the parties are unable to successfully execute their integration strategies or achieve planned synergies; as well as the other risks that are described from time to time in Brocade's SEC reports (including but not limited to the annual report on Form 10-K for the year ended October 27, 2001, and subsequently filed reports). If any of these risks or uncertainties materializes or any of these assumptions proves incorrect, Brocade's results could differ materially from the expectations expressed in these statements. Brocade assumes no obligation and do not intend to update these forward-looking statements. NOTE: Brocade, the B weave logo and SilkWorm are registered trademarks of Brocade Communications Systems, Inc. or its subsidiaries in the United States or in other countries. All other brands, products, or service names are or may be trademarks or service marks of, and are used to identify, products or services of their respective owners. All products, plans, and dates are subject to change without notice. Web site: http://www.brocade.com CONTACT: press, Fenella Tigner, +1-408-392-6843, or ftigner@brocade.com, or investors, Shirley Stacy, +1-408-392-5752, or sstacy@brocade.com, both of Brocade Communications Systems, Inc.; or Jodi Baumann of Benjamin | Weber Shandwick, +1-415-352-2628, ext. 137, or jbaumann@webershandwick.com, for Brocade Communications Systems, Inc. -3- -----END PRIVACY-ENHANCED MESSAGE-----

EX-99.1

                                                                    EXHIBIT 99.1

                      BROCADE TO ACQUIRE RHAPSODY NETWORKS

Storage Networking Leader to Deliver Industry's First Open, Intelligent
Platform for Fabric Applications

      SAN JOSE, Calif., November 5, 2002 -- Brocade Communications Systems, Inc.
(Brocade(R)) (Nasdaq: BRCD), the world's leading provider of infrastructure
solutions for Storage Area Networks (SANs), announced today an agreement to
acquire Rhapsody Networks, a privately-held provider of next-generation
intelligent switching platforms. Through the acquisition, Brocade will extend
its leadership position in the storage networking market to deliver the
industry's first open, intelligent platform for fabric applications. By
extending its intelligent platform, Brocade will help OEMs, application
partners, and SAN customers unlock the next level of intelligence in the SAN
fabric and further simplify the management of heterogeneous storage
environments.

    "We are pleased to announce the acquisition of Rhapsody Networks. The
powerful combination of Rhapsody's advanced technology and talented engineering
team, coupled with Brocade's market leadership, installed base, experience, and
partner ecosystem will further solidify Brocade's position as the reference
platform of choice and accelerate the next phase of the SAN market's evolution,"
said Greg Reyes, Brocade Chairman and CEO.

    As the result of this acquisition, Brocade expects to deliver to market a
new class of intelligent fabric application switches, which will be fully
interoperable with the Brocade SilkWorm(R) family of Fibre Channel fabric
switches. Brocade will work with leading OEM and application partners to enable
next-generation fabric applications, including fabric-based volume management,
fabric-based data replication, and fabric-based data management. These new
fabric applications will significantly extend the functionality, simplify
management, and reduce the operational cost and complexity of managing and
administering existing storage environments. By simply adding a new fabric
application switch to an existing Brocade fabric, SAN customers will multiply
the benefit of their investment in Brocade infrastructure. The Rhapsody
intelligent fabric application development platform is available today to OEM
partners. Brocade estimates that the first fabric applications based on these
platfoms will be available from specific OEM partners by the end of calendar
year 2003.

    The Rhapsody architecture is highly complementary to Brocade fabric
switches. In addition to hosting fabric applications directly, it supports
multiple protocols -- including Fibre Channel and IP -- and is accessed through
an open API. The API will be integrated with the Brocade Fabric Access API to
deliver a complete solution for the development of storage and data management
applications.

    Continued Reyes, "Through this open, intelligent platform for fabric
applications, SAN customers will be able to centralize data management by
integrating fabric applications into their existing environments, while
protecting their investment in Brocade SAN infrastructure. The intelligent
platform will provide our OEM and application partners with an increased market
opportunity for new revenue from innovative fabric-based applications."




    Conference Call Information

    Brocade will host a conference call today, Tuesday, November 5 at 2:30 p.m.
Pacific Time to discuss the acquisition. To participate in this conference call,
please call 877-407-2753 or 706-634-7602, passcode "Brocade." A simultaneous
webcast of the conference call will be available at
http://www.brocade.com/investors. An archive of the conference call will be
available through November 12 at 800-642-1687 or 706-645-9291, passcode 6503726.

    Brocade will report final financial results for its fourth quarter and
fiscal year 2002 on Thursday, November 21, 2002 after the close of market.

    Acquisition Details

    Under the terms of the acquisition agreement, Brocade will acquire all
outstanding shares of Rhapsody in exchange for 23.4 million shares of Brocade
common stock. This represents approximately 10 percent of outstanding common
stock as of November 5, 2002. Final purchase price will not be determined until
the closing date-which we expect to be in January 2003. Based on the closing
price of Brocade stock as of November 4, 2002, the deal will be valued at
approximately $175 million.

    Development platforms from Rhapsody are shipping today to OEM partners.
Brocade estimates availability of fabric applications based on these platforms
by second half of fiscal 2003 from specific OEM partners. Based on this timing,
we would expect revenue associated with the Rhapsody transaction to begin in
late fiscal 2003, with anticipated acceleration of revenues in fiscal 2004.

    Assuming that this transaction is completed by January of 2003, Brocade
expects the transaction to be dilutive to fiscal 2003 earnings per share by
$0.09; or $0.03 per quarter. This excludes one-time charges associated with the
acquisition and the amortization of intangibles and deferred stock compensation
costs. We expect the increase in ongoing operating expenses resulting from this
transaction to be approximately $6 to $7 million per quarter. We estimate that
the transaction will become accretive, on a pro forma basis, in the third or
fourth quarter of fiscal 2004.

    The Boards of Directors of Brocade and Rhapsody have unanimously approved
the transaction. Subject to regulatory approvals and customary closing
conditions, Brocade expects the transaction to close in January 2003.

    About Brocade Communications Systems, Inc.

    Brocade offers the industry's leading intelligent platform for networking
storage. The world's leading systems, applications, and storage vendors have
selected Brocade to provide a networking foundation for their SAN solutions. The
Brocade SilkWorm(R) family of fabric switches and software is designed to
optimize data availability and storage and server resources in the enterprise.

Using Brocade solutions, companies can simplify the implementation of storage
area networks, reduce the total cost of ownership of data storage environments,
and improve network and



                                      -2-


application efficiency. For more information, visit the Brocade website at
http://www.brocade.com or contact the company at info@brocade.com.

    Forward-Looking Safe Harbor Statement

    This news release contains forward-looking statements that involve risks,
uncertainties and assumptions. You can identify these and other forward-looking
statements by the use of words such as "may," "will," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts," "intend,"
"potential," "continue," or the negative of such terms, or other comparable
terminology. Forward-looking statements also include the assumptions underlying
or relating to any of the foregoing statements. For example, statements of
expected synergies, product introductions and features, dilution or accretion,
amount and timing of future revenues and expenses, timing of closing, industry
and market ranking, execution of integration plans and management and
organizational structure are all forward-looking statements.

    Risks, uncertainties and assumptions include the possibility that the market
for the sale of certain products may not develop as expected; that development
of these products may not proceed as planned; that the transaction does not
close; or that prior to the closing of the proposed merger, the businesses of
the companies suffer due to uncertainty; that the parties are unable to
successfully execute their integration strategies or achieve planned synergies;
as well as the other risks that are described from time to time in Brocade's SEC
reports (including but not limited to the annual report on Form 10-K for the
year ended October 27, 2001, and subsequently filed reports). If any of these
risks or uncertainties materializes or any of these assumptions proves
incorrect, Brocade's results could differ materially from the expectations
expressed in these statements. Brocade assumes no obligation and do not intend
to update these forward-looking statements.

    NOTE: Brocade, the B weave logo and SilkWorm are registered trademarks of
Brocade Communications Systems, Inc. or its subsidiaries in the United States or
in other countries. All other brands, products, or service names are or may be
trademarks or service marks of, and are used to identify, products or services
of their respective owners. All products, plans, and dates are subject to change
without notice.

Web site: http://www.brocade.com

CONTACT: press, Fenella Tigner, +1-408-392-6843, or ftigner@brocade.com, or
investors, Shirley Stacy, +1-408-392-5752, or sstacy@brocade.com, both of
Brocade Communications Systems, Inc.; or Jodi Baumann of Benjamin | Weber
Shandwick, +1-415-352-2628, ext. 137, or jbaumann@webershandwick.com, for
Brocade Communications Systems, Inc.



                                      -3-